This EITI Report covers Timor-Leste's extractive sector in 2017.
Timor-Leste’s economy is heavily dependent on oil and gas. According to the latest EITI Report, the oil sector accounted for 36% of the country’s GDP, 98% of exports and 41% of total imports in 2017. Compared with previous years, the export of the oil sector increased for the first time since 2912, ecxplained by a rise un the oil price.
In 2017, all of Timor-Leste's oil and gas was produced in BayuUndan (BU) oil field, located in the offshore Joint Petroleum Development Area (JPDA).
Oil production has been decreasing since 2012 due to the natural depletion of the BU field. There is considerable public debate about expenditure exceeding the annual allowable amount that can be withdrawn from the Petroleum Fund.
All of Timor-Leste's revenue from the oil sector – USD 463 million in 2017 according to the 2017 TL-EITI Report - is deposited in the Petroleum Fund, which had a balance of USD16, 800 million by the end of 2017.
The EITI Reports track how much of the Petroleum Fund is transferred annually to Timor-Leste's budget.
Petroleum activities take place both in the Joint Petroleum Development Area (JPDA) and in the Timor-Leste Exclusive Area (TLEA). Both JPDA and TLEA are governed under Production Sharing Contracts (PSCs) signed between the oil companies and the National Petroleum and Mineral Authority (Autoridade Nacional do Petróleo e Minerais – ANPM). ANPM is responsible for managing and regulating petroleum and mining activities in Timor-Leste. This agency was created under Decree Law No. 1/2016 on 9 February 2016.
The tax regime applicable to petroleum activities depends on the jurisdiction area, but profit oil, first tranche petroleum, royalties and corporate income tax are the main levies. FTP is a form of royalty collected for Bayu-Undan only. Royalty was paid in relation to Kitan until it ceased operations in 2015. Profit oil and gas is applicable to both Bayu-Undan and Kitan fields. The Timor Sea Treaty, which covers Bayu-Undan and Greater Sunrise field project, stipulates that Australia is entitled to 10% of the revenue from the JPDA while 90% belongs to Timor-Leste.
A state-owned company, TIMOR GAP represents the State’s interests in petroleum activities. This company receives government funds in the form of an annual public transfer for the purpose of supporting its operational activities in accordance with the State Budget Law. All revenues from the oil and gas sector go directly to the Petroleum Fund.
PSCs in both the JPDA and the TLEA are awarded on the basis of competitive bidding. The two main projects are the Bayu-Undan field and, until recently, the Kitan field which closed in 2015. Based on the latest TL-EITI Report, there are currently ten active PSCs with two in TLEA and 8 in JPDA. In 2015, TIMOR GAP started a participation in the exploration activities within the TLEA.
While there is no publicly available register of beneficial owners of corporate entities in Timor-Leste, the 2017 TL-EITI Report lists the ultimate owners of companies included in the scope of the EITI Report, including links to the stock exchanges where they are listed. Most extractive companies operating in the country are publicly listed companies.
In October 2019, a beneficial ownership feasibility study was conducted, establishing a definition of BO and outlining steps needed for BO disclosures to be fully in line with requirement 2.5 of the EITI Standard, including establishing a public registry for BO disclosures.
Oil and gas production in Timor-Leste has declined since 2012 mainly due to natural depletion of the Bayu-Undan field and the closure of Kitan field in December 2015.
In 2017 all of Timor Leste's oil and gas was produced in Bayu-Undan oil field, located in the offshore Joint Petroleum Development Area (JPDA).
Timor-Leste’s main resources are oil and gas. To date, all exploration and production have taken place offshore in the Timor Sea. One of the major discoveries in the Timor Sea is the Greater Sunrise field, which is partly located within the JPDA and partly outside the JPDA within Australia’s exclusive jurisdiction. In April 2019, the government of Timor Leste, through Timor GAP, purchased 56.56% of the Greater Sunrise gas and condensate, held by Conocophilips (30%) and Shell (26.56%). Woodside still holds a percentage of the fields.
Timor-Leste also has undeveloped mineral resources including copper, gold, silver and chromite. These minerals have been difficult to access given the poor infrastructure in the country. On 19 February 2014, the government improved the mining licensing process through the amendment of the Ministerial Diploma No. 1/2008. This resulted in a significant increase in the number of mining licenses in 2015.
The latest EITI disclosures show that in 2017, Timor Leste's oil revenues were 463 million dollars. a value twice higher than in 2016 (with 2016 having the lowest value in the last 8 years.) In comparison with 2016 the high result was derived
from the higher oil prices, which were boosted by the strong global demand and producers agreeing to cut production.
All of Timor-Leste’s oil and gas revenues are deposited in the Petroleum Fund. A majority is invested abroad in financial assets.
Petroleum revenues and investment returns contributed 422 million USD and 1,612 million USD respectively to the Fund in 2017, according to the latest EITI report. The total withdrawal of 1,079 million USD from the Fund was used to finance the Government’s budget. At the end of 2017, the balance in the Petroleum Fund stood at 16.80 billion USD. This was almost 1.00 billion USD higher than in December 2016.
The implications for the Petroleum Fund’s investment strategy are carefully considered and are summarized in the Petroleum Fund’s Annual Report section “the advice from the Investment Advisory Board”. The Annual Reports are published on the Ministry of Finance’s website (the latest one available is from 2017).
The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.
The EITI process in Timor-Leste has been useful in disclosing the status of the Petroleum Fund and how it is transferred to the national budget. Timor Leste is considering moving towards mainstreaming of EITI data and has worked with the International Secretariat in conducting a feasibility study for mainstreaming. The government maintains a Transparency Portal which links EITI implementation to wider transparency and accountability in the country. This includes a Budget Transparency Portal which gives oversight to budget expenditure. Up-to-date information on the legal framework, licensing, contracts, production, social expenditures and non-tax revenues is also available through the website of the ANPM. The Petroleum Fund website contains quarterly reports on revenues and the overall status of the fund, as well as annual reports that include budget allocations. Timor Gap’s website has information on the financial situation of the company as well as other activities.
Timor-Leste joined the EITI in 2008.
While Timor-Leste was suspended on 1 March 2017 for failing to publish the 2014 EITI Report by 31 December 2016, the suspension was lifted on 29 June 2017after the publication of the missing report.
In January 2017, Timor-Leste was found to have achieved meaningful progress in implementing the EITI Standard and the MSWG was given until 11 April 2017 to submit an action to plan to address the corrective actions relating to industry engagement and civil society engagement. On 14 February 2018, the EITI Board found that Timor-Leste addressed all corrective actions and has made satisfactory progress in implementing the 2016 EITI Standard.
The MSWG's work plan contains the following objectives:
- To ensure the publication of EITI Report in a timely manner and in accordance with EITI Standard 2019;
- To encourage discussions on transparency in public expenditures, including investment decisions focus on economic diversification;
- To encourage discussions on legal framework and maintain contract transparency within extractive industries and other revenues generated in Timor-Leste; and
- To enhance EITI institutional development include capacity building for MSWG and National Secretariat members
The Ministry of Petroleum and Mineral Resources oversees EITI implementation in Timor-Leste. A list of MSWG members is available in the 2018 annual progress report of Timor-Leste EITI. While no changes in law were needed for EITI to take place in Timor-Leste, the MSWG recommends enacting an EITI law.
Timor-Leste was found to have made satisfactory progress in meeting the EITI Standard on 14 February 2018. The country was previously found to have made meaningful progress on 11 January 2017 during the First Validation. Timor-Leste took corrective actions on a number of requirements and achieved satisfactory progress during the Second Validation. Timor-Leste's Re-validation will commence in February 2021.
Timor-Leste's progress by requirement can be found in the scorecards below.
Scorecards show the outcomes of Validation. Arrows of progress indicate where the International Secretariat has re-assessed a requirement following a corrective action in a second or third Validation.
This is the Timor-Leste EITI 2019 work plan (in accordance with Requirement 1.5).
The Annual Progress Report provides an overview of all EITI Timor-Leste's activities during 2018.
The Annual Progress Report provides an overview of all EITI Timor-Leste's activities during 2017.
This is the Timor-Leste EITI 2018 work plan (in accordance with Requirement 1.5).
On 14 February 2018, the EITI Board found that Timor-Leste addressed all corrective actions and had made satisfactory progress in implementing the 2016 EITI Standard. See decision 2018-15/BM-39/BP-39-5-H
In this second Validation the EITI International Secretariat has assessed the progress made in addressing the ten corrective actions established by the EITI Board following Timor Leste’s first Validation in 2016. See more under background below.
Timeline of Validation and related materials
Attached below is Timor-Leste's roadmap on how it intends to disclose the beneficial owners of the companies active in the extractives sector (requirement 2.5).
More information on beneficial ownership can be found at eiti.org/beneficial-ownership.